AAPR
Average Annual Percentage Rate – It’s a term we use to describe the “true rate” of a loan. AAPR is more of an American term, seldom seen in Australia. We use it to work out the real cost of a loan, because it takes into account honeymoon rates, ongoing fees, introductory offers and discharge fees as well as the advertised interest rate. The AAPR calculation is based on the actual loan amount and how much is charged for it over the loan term. The AAPR doesn’t include government fees, exit or early repayment fees and service fees like redraw and internet usage charges.
Absolute Title
A title that gives the owner full ownership of a property, free from any claims or encumbrances.
Example:
“A buyer with an absolute title doesn’t need to worry about anyone else claiming ownership.”
Abut
When one property shares a common boundary with another.
Acceptance
A formal agreement to the terms of an offer or contract.
Accrued Interest
Accrued interest is the amount of loan interest that has already occurred but has not yet been paid to the lender by the borrower. The accrued interest will be reported by the borrower as both. an expense on its income statement, and. a current liability on its balance sheet.
Agent
Someone who acts on behalf of another person or organisation. For example, a real estate agent acts on behalf of a landlord or owner when leasing or selling a property.
A&L
Assets and Liabilities
Amortisation period
Also known as the loan term. It’s the agreed length of time that a borrower has to repay a loan. It’s set during the application and approval process.
APP number
Contains all purchase loans and we need to call Macquirie to get data/details
Application fees
The fees a lender charges to set up the loan. It’s generally to cover the lender’s internal costs.
Appraised value
The estimated value of a property being used as security for a loan.
Appreciation
The increase in the value of a property.
Arrears
An outstanding or overdue amount.
Assets
Money, property or goods owned.
ATO Notice of Assessment Is an itemised account of the amount of tax you owe on your taxable income. Unless you are using electronic funds transfer (EFT), the bottom section of your notice of assessment will be either your refund cheque or, if you owe tax, your payment advice.
Auction
A public sale where a property is sold to the highest bidder.
Body corporate
All the unit owners within a strata building. The owners elect a council responsible for the management of the building and it’s common areas.
Breach of contract
Breaking the conditions of a contract.
Break costs
Penalty charges for ‘breaking’ or ending a fixed term loan before the agreed date.
Bridging finance
A loan used to cover the finance gap that can happen when a buyer purchases a new property before selling an old one. Higher interest rates are usually charged for this form of finance, and it has to be paid back after an agreed time.
BSB
A BSB (Bank-State-Branch) is a six-digit number that identifies banks and branches across Australia.
Building inspection
An inspection generally carried out prior to the purchase of a property to ensure the building is structurally sound. Contracts of sale can be made subject to the satisfactory building inspection.
Building regulations
Legal or statutory rules set up by a local council to control the manner and quality of buildings in it’s jurisdiction. The rules are generally designed to ensure public health and safety as well as acceptable standards of construction.
Building society
A financial institution owned by its customers or “members”. It offers banking and other financial services, especially mortgage lending.
Capital gains
The financial or monetary gain obtained when an asset is sold for more than its original price.
Capital gains tax
A federal tax on the monetary gain made on the sale of an asset bought after September 1985. The tax does not apply to the gains made on the sale of an owner-occupied residence, so it generally applies only to investment properties.
Capped loan
A loan where the interest rate cannot exceed a set level for a period of time but, unlike fixed rate loans, can fall.
CAT
Client Advice Tool
Caveat
A caveat lodged upon a land or property title indicates that a party, that is not the owner, claims some right over or interest in the property.
Certificate of Title
A record of all current information relevant to a particular property or piece of land, including:
A lender usually holds this document as security. Once the loan is fully repaid, the Certificate of Title is returned to the borrower.
Chattels
Chattels are items of personal property, such as clothing, appliances and furniture. In real estate terms chattels are usually movable items which may be included in the sale, such as furniture.
CIF
Client Information Form
CMA
Cash Management Account
COC / COI
Certificate of Currency / Certificate of Insurance or Proof of Insurance
Commission
The fee or payment made to a real estate agent for services.
Conveyance
The transfer of property ownership and changing the title of a property from the seller’s name to the buyer’s name.
Conveyancing
The legal process for the transfer of ownership of real estate.
Cover note
A guarantee of temporary property insurance before the implementation of a formal policy.
Credit
Borrowed money or other finance to be paid back under an arrangement with a lender.
CREDIT LIMIT INCREASE
Increasing the amount of money in your home loan.
Credit union
A cooperative which operates similarly to a bank, but is owned and controlled by people who use its services.
Creditor
A person or organisation who is owed money.
Cross-collateralization
When 2 properties are used as security for a loan
DDR
Direct Debit Request (form)
Debtor
Someone who owes money to someone else.
Deed
Another word for title. It’s a legal document that states all information regarding the ownership of a property or piece of land.
Default
Failure to abide by the terms of a mortgage or loan agreement – such as not making loan minimum required repayments. Defaulting on a loan may result in financial penalties and, in extreme cases, the mortgage holder taking legal action to repossess the mortgaged property.
Deposit
An amount paid by the buyer at the time of exchanging the contract for sale. It acts as a commitment to buy. Normally a minimum of 5-20% of the total purchase price is required.
COMPARISON RATE
A rate that includes upfront and ongoing fees as well as the advertised interest rate. It will assist you in identifying the true cost of the loan.
Concession
A preferential allowance or rate given by an organization. Reduction or discounts.
Contract of Sale
A written agreement outlining the terms and conditions for the purchase or sale of a property.
Deposit bond
A guarantee from a financial institution that a deposit will be paid to a seller. It’s useful for buyers with savings in a term deposit because it can be offered at the time of exchange – instead of a cash deposit. Which means the buyer doesn’t have to break the term deposit and lose any interest accrued. The buyer must pay the full purchase price of the property, including the amount of the deposit, at settlement. In the event that buyer does not settle on the property the seller will be paid the deposit amount by the financial institution.
DEPOSIT BONDS
Are a guarantee or bond that substitutes for a cash deposit between signing contracts and settlements. Deposit bonds can be up to 10% of the purchase price and can be for all or part of the deposit amount required.
Direct debit
Regular electronic debiting of funds from a nominated cheque or savings account.
Disbursements
Miscellaneous fees and charges incurred during the conveyancing process, including search fees and charges paid to government authorities.
Discharge Authority
Also known as Discharge Request, Release of Security or Request to Vary
Discharge fees
An administration fee to cover the costs incurred in terminating a loan account.
Discharge of Mortgage
A document signed by the lender and given to the borrower when a mortgage loan has been repaid in full.
Disposable income
A person’s remaining income after all known expenses, such as loan payments and bills, have been met.
Draw down
To access available loan funds. Draw down usually refers to a construction loan, or a line of credit. That is a loan where the limit is set, but the amount is not accessed all at once. The borrower draws down or uses the funds as required, up to the set limit.
Easement
A right to use a part of land owned by another person or organisation, for example to access another property.
Encumbrance
An outstanding liability or charge on a property.
Equity
The amount of a property actually “owned” by the owner. It’s the current value of a property less the amount still owed on its mortgage. Equity usually increases as the principal of the mortgage is paid off. Market values and improvements to the property can also affect equity.
Equity Access
Is a revolving line of credit secured against your property. Use your equity to renovate, invest or to fund those great plans you’ve always had. You can draw on your credit up to your approved limit. Make payments and redraw again, whenever you need.
Establishment fees
Fees charged by a lender to cover the cost of setting up a loan.
Exit or early repayment fees
Penalties charged by some lenders when a loan is paid off before the end of its term.
Extra repayments
These are regular additional repayments on a home loan account, above the minimum required repayment, which can reduce the term of the loan and the interest payable.
FEE-HELP
Is a loan for eligible domestic fee paying students. These places are not subsidised by the Government and tuition fees are set by the approved providers. FEE-HELP is available at both public universities and approved FEE-HELP providers.
First Home Owners Grant
A grant from the Federal and State Governments. It was introduced as compensation for the increased cost of housing after implementation of the Goods and Services Tax (GST) on 1 July 2000. It’s only for buyers that have not previously bought property in Australia.
Fittings
Items not intended to be removed from a property when it’s sold, for example fixed carpets, lights, curtains and stoves.
Fixed rate
An interest rate that applies to a loan for a set term. Both the interest rate and loan repayments are fixed for the agreed term, regardless of any interest rate variations in the home loan market. The agreed term is usually anywhere between 1 and 7 years.
Freehold
Complete ownership of a property and the land that it’s built on.
Gazumping
When a seller accepts an offer from a buyer but then proceeds to formalise the sale of the property to another buyer with more favourable terms.
Guarantee
A contract to pay someone else’s debt if they don’t pay it.
Guarantor
A person or organisation that agrees to be responsible for the payment of a loan – if the actual borrower defaults or is unable to pay.
HECS-HELP
Home equity
Is a loan for eligible Commonwealth supported students studying at public universities (and some approved private higher education providers). Commonwealth supported students study in Commonwealth supported places which are subsidised by the Government so that students only pay a student contribution for their units of study. All of our undergraduate students study in Commonwealth supported places.
Home loan
The funds borrowed to purchase a property. The property acts as security for repayment of the loan. The lender holds the title or deed to the property. It’s also known as a mortgage.
Instalment
The regular payment that a borrower agrees to make to a lender.
Interest
The amount charged for the money borrowed from a lender.
Interest only loan
A loan where only the interest is paid for an agreed term, usually 1 to 5 years. The principal is then repaid over the remaining term of the loan by the conversion of repayments to principal and interest.
Interest rate
The percentage of the loan amount, used to calculate the interest to be paid for a loan.
Introductory loan
A loan offered to new borrowers at a reduced rate for an introductory period – usually 6 to 12 months. It’s also called a discounted or honeymoon rate.
Investment property
A property purchased for the sole purpose of earning a return, either in the form of rent or capital gain. The owner does not live in the property.
Joint tenants
Equal holding of a property between two or more people. If one party dies, their share passes to the survivor or survivors.
Lease
An agreement between a property owner and a tenant. It allows the tenant to occupy and use a property for a set period in exchange for a set rent.
Lender’s Mortgage Insurance (LMI)
Insurance which covers the lender if a borrower defaults on a loan and the sale of the property doesn’t cover the outstanding debt. It’s usually required for the loans the lender considers more risky. For example, when the amount borrowed is over 80% of the property value. Only the lender is covered by this insurance. It offers no protection to the borrower.
Line of credit loan
A flexible loan arrangement with a specified limit to be used at a customer’s discretion.
LOAN TO VALUE RATIO (LVR)
The LVR refers to the size of your home loan expressed as a percentage of your property’s value. For example, if you borrow $300,000 to fund a property worth $375,000, the loan is said to have an LVR of 80% ($300,000 is 80% of $375,000).
Lump sum repayments
Additional ad hoc repayments, made over and above the minimum loan repayment required.
LTO
Land Title Office
LVR
Abbreviation for the term Loan to Value ratio. It is the percentage of the loan amount compared to the value of that property. So if a house is worth $160,000, and the mortgage is $100,000, then the LVR is 62.50%. Most lenders require a borrower to take out Lender’s Mortgage Insurance if the LVR is 80% or more.
MA
Male Applicant
Maturity
The date when a debt must be paid in full.
Maximum loan amount
The maximum amount that can be borrowed. It’s based on a borrower’s disposable income, deposit, and the purchase price of the property.
Minimum loan amount
The minimum amount that can be borrowed.
Minimum repayment required
The amount a borrower is contractually obliged to pay each month, in order to repay a loan within an agreed term.
Mortgage
The funds borrowed to purchase a property. The property acts as security for repayment of the loan. The lender holds the title or deed to the property. It’s also known as a home loan.
Mortgage Broker
A person or organisation offering to organise or sell loans on behalf of a group of lenders.
Mortgage offset account
A savings account linked to a home loan. The interest earned by the money in the savings account offsets – or reduces – the interest due on the home loan. A 100% offset is where the interest rates earned and paid are the same. A partial offset account is where the interest earned on the offset account is only a portion of the rate paid on the home loan.
Mortgage Protection Insurance
This insurance covers loan repayments should a borrower become sick, injured or redundant and unable to work. It is also called income protection insurance. This insurance covers the borrower not the lender.
Mortgage registration fee
A State Government charge for the registration of a loan. Because the property acts as security for a home loan, the government requires a home loan to be registered so that all claims on a property can be checked by any future buyers of that property.
Mortgagee
The lender of home loan funds.
Mortgagor
The owner or owners of the property offered as security for a loan.